Foreign trade

TRADE

Meaning:

The process of buying & selling of goods & services is called trade

Types of Trade:

1.    Internal Trade: It is one which takes place within a motion. It is the trade within the political boundaries of country.

2.    International Trade: It is a trade b/w different nations of the world.

Foreign Trade of India:

Precisely India’s imports & exports constitute its foreign trade. It has an important role in the development of a country. As a developing Nation India has to depend much on foreign trade & thereby avail all the advantages provided by foreign trade. India is importing all the goods required for development & other necessaries. It exports a large varieties of goods as well.

Features of India’s Foreign Trade:

1)    Increase in Volume: The most important feature of India’s foreign trade is the increase in the volume of trade over the years. In 1950-51 the total value of our foreign trade was only Rs.1251 crores. This has increased to Rs. 664869 crores by 2003-04.

2)    Change in Direction of Trade: was a significant change in the direction of India’s foreign trade. Before 1960 UK was the main trading partners & recently India has developed trade links with America, Germany, France, Belgium, Russia, Iraq, Saudi, Kuwait, etc. & others developing Nations of Asia & Africa.

3)    Change in Composition of Trade: Before independence we were exporting primary goods & importing finished goods but after independence we witnessed a considerable change in the composition of our foreign trade. Now we are exporting finished goods & importing capital goods.

4)    Divorsed Exports: Before independence we use to export primary goods. The traditional goods like jute products, cotton & other raw materials. But after independence owing to economic changes & rapid economic development. We started reporting finished goods. These include engineering goods, motor vehicles, ready-made garments, handicraft goods, etc.

5)    Government Intervention: The Govt. involvement is more in international trade & is committed 40 make the best use of the foreign exchange & implemented. The policy of export promotion, import substitution & state trading.

6)    Trade Agreement: The Govt. has entered into bilateral & multi-lateral agreement with various countries or various nations. This agreement we can increase export & imports of essential goods & services & such trades are usually beneficial.

7)    Export Promotion: The Govt. gives encouragement to exports in the form of tax concessions, subsidies, market system, providing resources, publicity, etc.

8)    WTO: India was liberalized its economic system. The foreign trade sector is also liberalized. Globalisation has given much emphasis in 1995 & India joined. The WTO which has come into existence as replacement to GATT.

9)    Deteoriation in Terms of Trade: The most alarming development of India’s foreign trade is the deteoriation in terms of trade. Since 1950-51 to the present day the terms of trade have been subjected to great fluctuations.

Exports and Imports of India:

During Pre-British period (16^th century), Indian merchants were exporting various types of manufactured articles especially of textiles, handicrafts which had world-wide reputation. But after the British role, Indian handicrafts particularly textiles handicrafts could not face competition from British. Machine made textiles & hence India’s export trade was confined only to exportation of raw material.

During the post independence period, India has experienced a change in the composition &  commodities are also increased in the export list of the country.

Since 1950-51 we see the upward trend in the exports of India, it was Rs.606 crores & it went up to Rs.2, 93,367 crores during 2003-04. The growth of exports has not been uniform over the years. During 1950-51 the exports was 6.8% & it fell to 3.9% in 1965-66. After 1966 it slowly achieved the progress & there after the growth was impressive (2004-05) the exports registered an increase of 25.6% as against 20.3% during 2003-04.

Composition of Exports:

1)    Increase in Manufactured Items: The very important development in the composition of our exports is that the dependence on conventional goods is gradually declining & that of manufactured goods is increasing. The export of Non-conventional goods, chemicals, machines, transport equipment, etc. is on the increase. So the share of manufactured items in our total exports which was 43% in 1960-61 increased to 50% in 1970-71. It further went upto 56% in 1980-81 & during 2003 – 04 it went upto 76%.

2)    Board Based Expansion: There is a great increase in exports of engineering goods, iron & steel, chemicals, sugar, etc. There is also a considerable increase in the exports of cotton textiles leather goods, tobacco, coffee, etc. Today more than 30000 items have been included in the list of exports.

Main Items of Export:

a)    Primary Commodities: Consist of agricultural products, minerals.

b)    Manufactured Goods: The manufactured goods have become very important items of India’s exports in recent years, like readymade garments, leather & leather goods, cotton yarn, jute, handicraft, etc.

c)    Service: With the growth in Info. Tech. & Business process outsourcing (BPO), India has emerged as one of the important service exporters in the recent years. There was an upward shift in the growth of service experts from 7.9% during the first half 1990 (15.3%) during 2001-03 & 04. The contribution of travel, transportation & miscellaneous is also significant. The services experts increased by 20.2% in 2003-04 of which travel, transportation, software & miscellaneous services accounted for 16.5%, 13.4%, 48.9% & 18.7% respectively.

Chief Export of India.

1.    Textile Factories & Manufactures: There is a great demand for India’s cotton factories & garments in the foreign country. These items have an important place in our exports. In 1960-61, it fetched a foreign exchange of Rs.65 crore. This had increased to 44,234 crores in 2003-04.

2.    Engineering Goods: After independence there was an enormous progress in the exports of engineering goods. During 1960-61 the total value of exports of these goods was 22 crores. By 2003-04 it went upto Rs.48,853 crores.

3.    Handicrafts: This also occupies an important place in oue exports during 1970-71. The total value of exports of these items was Rs.73 crores. It increased to Rs.4867 crores during 2003-04. Exports of gems & jewelleries was Rs.48,586 crores during 2003-04.

4.    Jute Items: The exports of these items have decreased in recent years due to various seasons. It was Rs.135 crores. During 1960-61 & it went upto Rs.1113 during 2003-04.